Sustainability Report 2010

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Chairman’s Statement:
ITC’s Vision and Strategy

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Key Impacts, Risks And Opportunities: Sustainability Challenges

REGULATION AND TAXATION

Discriminatory Rates of Taxation

ITC's Initiatives

Despite accounting for only 15% share of consumption, cigarettes contribute more than 85% of the Indian Government’s tax revenues from the tobacco sector. Taxes realised from every kilogram of tobacco consumed in the cigarette format are 35 times higher than those from other forms of tobacco products. The excessively high rate of taxation has led to a massive growth in tax and duty evaded cigarettes. This impacts the legitimate industry, and also Government revenues. Tax-evaded cigarettes account for more than 8 % of the Indian market.

In addition, non-uniform tax rates prevailing between States have not only led to trade diversion compromising the industry’s ability to service the market effectively but also resulted in sub-optimisation of cigarette tax revenues to the State Exchequers. The move to a GST regime will have to address the imperative need for uniformity of taxes between states.

	ITC will continue to engage with policy makers through appropriate industry fora for a balanced regulatory and fiscal framework that addresses the genuine concerns of all stakeholders.

	It is also the Company’s strategic intent to create multiple drivers of growth by investing in businesses of the future, leveraging its diverse competencies in world-class manufacturing, branding, packaging, agri-sourcing, hospitality, marketing and distribution. In the FMCG sector, ITC’s products that span Branded and Packaged Foods, Personal Care, Education & Scholastic products, Apparel and Lifestyle products are fast gaining market share.

Policies governing the Agri-sector

ITC’s Initiatives

Responding to cyclical issues such as inflation, frequent changes have taken place in policies that govern India’s agricultural sector. These impact the scale, risk and profitability of ITC’s e-Choupal operations. Policies that distort markets (eg. export bans, subsidies) or impose restrictions on smooth operations (viz. stock controls, prohibition of futures) adversely impact companies engaged in the agri-sector. In addition, the slow reform of Agricultural Produce Marketing (Regulation) Act (APMC Act) that enables direct transactions between the farmers and the agri-businesses is another area of concern.

	ITC will continue to engage with policy makers through appropriate industry fora for a pragmatic policy framework that addresses the unique needs of India’s agri-sector and its farmers, and supports the growth of agri-business as a cornerstone of developing India’s rural sector.

	The e-Choupal model is being continuously improvised to keep it contemporary. ITC is now reshaping the e-Choupal model, in its version 3.0, (which is now in its pilot phase), to leverage the spread in mobile telephony and the growing aspirations emerging from the semi-urbanisation of some of the top tier villages.

	Recognising that the needs of rural India are changing, e-Choupals are gearing up to provide a new spectrum of services that move from “customisation” to “personalisation”. Analytical tools are being designed to examine uploaded data through mobile phones to provide extremely individualised services. New partnerships are being forged to help support micro-enterprises as also new off-farm opportunities through a recently created virtual rural employment platform available at “rozgarduniya.com”.

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Chairman’s Statement:
ITC’s Vision and Strategy

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